Merger creates leading Australian biotech

Biotech companies Avexa and Progen have announced a merger that will result in the creation of one of Australia’s biggest biotechnology companies.

Biotech companies Avexa and Progen have announced a merger that will result in the creation of one of Australia’s biggest biotechnology companies.

The combined entity’s chairman-designate Nathan Droma describes the deal as a “true merger of national interest” and says the merger will create “a leading Australian biotech company” with expertise in oncology and infectious diseases.

“Both companies will get the benefit of some earlier stage programs already in the companies’ portfolios, so we can pick and choose the best opportunities to move forward. We can pick the ones that make sense and deliver value to the company,” he says.

Progen chief executive Justus Homburg says the merger will provide both companies with an opportunity to expand. Avexa will receive crucial funding to allows its anti-HIV products to proceed to clinical trials.

“The merged entity will have a higher quality of portfolio of opportunities than either company individually.”

But shareholders weren’t convinced. The announcement saw Progen shares dive 11%, closing at $0.72 yesterday, while Avexa shares shed a whopping 23% to close at $0.79.

The merger comes after Progen’s six-month search for strategic options after the cancellation of trials of its cancer treatment product. The transaction values the group at $80 million, with Avexa valued at $42 million.

Progen shareholders will now hold 56% of the merged group, while Avexa shareholders will maintain 44%. The new entity will be known as Avexa Pharmaceuticals and will have Avexa management control.

But the proposal will require the support of 75% of Avexa’s shareholdings, with shareholders in both groups set to vote on the deal early next year.

Avexa chief executive Julian Chick will take the chief executive role for the combined group, with Progen chief executive Mal Eutick will join the board.